Ray Ison, Professor in Systems at the UK Open University since 1994, is a member of the Applied Systems Thinking in Practice Group. From 2008-15 he also developed and ran the Systemic Governance Research Program at Monash University, Melbourne. In this blog he reflects on contemporary issues from a systemic perspective.

Wednesday, February 08, 2012

Recent events throughout the globe have put into perspective the need for new theory settings, new approaches and new insights into the current social dynamics that many consider on a verge of rupture. Financial crises, social uprisings, forced governmental collapses, and increasing inequalities within several spheres of the social world are some of the events that necessarily put collective and individual social action into new perspectives.

It is no longer possible to think of social phenomena in a disconnected way, since their foundations and limits are not clear. The understanding of social action and interaction, as cause and consequence of social phenomenon, depends on the capacity to consider and analyze all possibilities in action systems, their diversity and relations integrating micro, macro and meso perspectives. It is therefore, imperative for the sociocybernetic approach to address such a challenge.

The study of the interaction between multiple systems can be a useful and sound new way of thinking, especially if it follows a transdisciplinary approach. From the variety of subjects relevant in this respect, the next RC51 2012 Conference in Faro, will emphasize the following:

1. Decision Making and Action: Decision making is a highly complex embodied process resulting from the concerted action of a diverse set of interconnected systems that allow for the development of social action under the uncertainty that the future holds. Under this theme, we intend to explore the complexity of the intra-systemic and inter-systemic pathways framing decision-making and subsequent social action.

2. Violence: Violence is an interconnected system, socially and culturally produced and reproduced, and therefore embedded in individuals, institutions and states. The production of violence is a phenomenon with deep interconnections between the social, cultural, biological, emotional and symbolic systems. The discussion between the articulation of the individual system (composed of responses/actions/reactions/interactions),and the social and cultural system which provide the actor with thesymbolic, and many times, unconscious tolls of actions and interactions, iscrucial to advance the production of knowledge in this area.

3. Social Movements: The new social movements, now emerging in many countries, with different levels of economic development, combine a variety of new dimensions that exceed previously sociologically knowledge. The sociological analysis of these movements’ actions requires, primarily, an intersystem approach of the complexity of all its dimensions, and secondly, two other dimensions of the social actors' selves: the relationship between themselves and the relationship that each social actor wants to have with old and new groups, organizations and institutions.

Papers are welcomed which address these issues. Beyond that other papers addressing conceptual and theoretical issues in sociocybernetics or reporting relevant empirical findings are also welcomed.

It is a great pity that journalists and media commentators are not versed in systems thinking like Simon Caulkin. In his most recent article Simon exposes the widespread myth of shareholder ownership of companies. He writes:

"Where did the myth come from? For once it is possible to
pinpoint the source with some accuracy. Flashback to the end of the
1970s, when a growing feeling that shareholders were being short-changed
by corporate managers who had grown fat and lazy in the long post-war
boom was crystallised byMichael Jensen and William Meckling in a paper
that despite its less than pulse-quickening title, 'Theory of the Firm:
Managerial Behaviour, Agency Costs and Ownership Structure', remains the
most quoted ever in the economic literature.

The authors cast managerial underperformance as a 'principal-agent
problem'. In their construct, shareholders are the firm's 'principals'
who hire managers to run the company on their behalf. The 'agency
problem' arises because if they can get away with it managers will (like
everyone else) put their own interests first. In other words, the
incentives are misaligned. Ergo, the argument runs, the way to get
managers to do their job is to realign the incentives by giving them
significant amounts of stock-based compensation, turning executives into
shareholders too.

There is one glaring snag in the theory. In law, directors and managers
aren't employed by shareholders at all but by the company as ‘autonomous
legal person’. But that doesn't square with the new (and wholly
ideological) assertion that the company’s sole purpose is to maximise
shareholder value. That can only be the case if shareholders actually
own the company. To sidestep this inconvenient fact, the authors simply
dismiss the company's autonomous status as ‘legal fiction’— a ‘simple
falsehood’, points out Gordon Pearson in his careful study, The Road to Cooperation, on which is based the entire edifice of governance that has
stood ever since.

Ironically, Jensen and Meckling’s pro-shareholder remedies were eagerly
seized on managers who correctly spotted in them a bonanza-in-the-making
that would make their previous pickings look like small change. The
theory expected them to be greedy; they complied in full, demanding ever
greater incentives for their alignment in a perfect example of the
self-fulfilling prophecy."

So at the root of so much of the current angst about bonuses, corporate greed and company non-performance are ill-equipped theories - ways of thinking - that become institutionalised. No wonder Maynard Keynes once said:

‘Practical
men, who believe themselves to be quite exempt from any intellectual
influence, are usually the slaves of some defunct economist’